Markets

Realty and infra may lead bear to bull market move

In an interview with ET Now, Gautam Shah, Associate Director & Technical Analyst, JM Financial, says he would strongly recommend investors to allocate at least 15% of the portfolio in some of the popular names in the infra and realty space.

Edited excerpts:
Would you be selling IT at this juncture?

I do not think so but in a bull market, opportunity cost is a huge cost. I do not think some of the large-cap IT stocks are going to move at the same pace and therefore if you are looking at alpha, you will have to move to some of the other sectors in the market.

But midcap IT is still very exciting because the breakouts that we saw a couple of months back was after months and months of consolidation.

I do not think the run-up is going to end very fast there. Midcap IT is where investors can continue to hold for the rest of this year and it is going to outperform the broader markets but large-cap IT is going to get into a consolidation band and therefore just to get that relative strength, you might look to book some profits there and move to some of the other pockets which I mentioned.

Within capital goods, where do you find opportunity where people can even buy a fresh at this level and still make money for the remainder of the year?

Unfortunately, I cannot give you stock specific ideas because compliance does not allow that but the top four or five stocks in the capital good space, the BSE capital goods index which, I believe, is trading at around 19,500 I see a 20% jump for the rest of 2018.

The way the capital goods index handled itself in the bad times, when the Nifty fell from 11,000 to 10,000, was quite commendable. L&T is clearly on top of that list. The big boy has made a good comeback in the last couple of weeks and most of these popular stocks in the capital goods space will do very-very well so this is not a trading idea.

This is more of a buy and hold idea and I think if you just hold on to some of these capital goods stocks for the next six to nine months, you could be anywhere between 15% and 30% on the upside.

Where do you think there is a change in the long-term pattern? Which sector do you think is on verge of entering from a bear market to a bull market and from a bull market to a bear market?

I do not have any names from bull market to bear market because overall I am quite positive on the Indian markets. I see the Nifty and the other popular indices scaling new highs in the months to come.

But bear market to bull market, there are many pockets and right on top of that would be realty and infrastructure.

The way some of these stocks have behaved in the last couple of months, gives me a lot of encouragement, lovely set ups out there. The damage has been so huge in the last couple of years that even if these stocks double in value, it will be a very small rally in comparison to the fall because many of these names have lost anywhere between 50% and 90% in the last many years.

I see lovely setups across the board in the realty and infra space and investors are in for a huge surprise. I am sure the fundamentals will gradually back this technical view that I am presenting but the charts are as good as it can get and I would strongly recommend investors to at least allocate 15% of the portfolio in some of the popular names in the infra and realty space.

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